Treasury prices fell on Friday, pushing yields up for the third week in four, after the Labor Dept. said the U.S. economy lost fewer jobs last month than economists predicted.

Yields on 10yr notes jumped 7bps to 3.69%, after earlier posting the biggest increase since Feb. 17. Yields on 2yr notes rose 4bps to 0.90%. Yields increased earlier by the most since Jan. 27. Yields on 10yr debt are up from 2.59% last Friday, while 2yr note yields have increased from 0.86%.

Indications of a stronger economy reduce demand for the relative safe-haven of U.S. government debt in downturns.

Nonfarm payrolls fell by 36K jobs in Feb. as the U.S. unemployment rate stayed put at 9.7%. Economists had been looking for a bigger monthly decline in payrolls and for the unemployment rate to creep back up to 9.8%. Estimates varied widely depending on the expected impact of last month's flurry of snowstorms.

Also Friday, interest-rate futures traders increased bets that the Fed will raise rates by the fall of this year. Fed fund futures for Sept. delivery are pricing in a 40% chance that rates will rise to a half percentage point by then, up from the current range of zero to a quarter-point. The contract was pricing in a 20% chance on Thursday.

The December contract is pricing in a 68% chance that rates will rise to 0.75% by the month, compared to a 61% chance before the payrolls data.

Fed policy makers next meet on March 16 and are likely to repeat language saying that slack in the economy and tame inflation merit keeping benchmark rates low "for an extended period" -- interpreted by many officials to mean about 6 months.

Part of what's kept inflation low is small wages gains, something that Friday's jobs report also demonstrated.

Still, bond funds have been big beneficiaries of funds coming out of money market accounts, according to fund-data firm EPFR Global. Global bond funds received $2.6B in the latest week, the biggest one-week increased since EPFR began tracking it in 2000. U.S. bond funds also saw inflows for the 61st consecutive week, rising by $2B, according to EPFR. High-yield bond funds also posted inflows.